By Brian Kovalesky, StartUp Beat editor
Latin America has long been the subject of investor chatter as a potentially huge growth market for new businesses and investment. But after many years of talk, investment money for early-stage ventures is beginning to flow into the region, due in large part to growing political stability and the efforts of individual governments to encourage entrepreneurship. Chile, in particular, has been a vanguard in promoting and building an entrepreneurial ecosystem through its government-sponsored Startup Chile initiative, and CORFO, a joint private/public sector program that provides resources to help build startups and innovative small businesses in the country.
After political turmoil in the 1970s and 1980s that included a brutal dictatorship that lasted more than 15 years, the country is now one of the most economically prosperous and stable in Latin America, and the Chilean government has started to reach out to international investors to help support its burgeoning startup ecosystem. At the end of January, Origo Ventures, a San Diego-based VC firm focused on early-stage investments in the region, was awarded a $1 million grant from CORFO to expand its footprint in the country.
Here’s a Q&A with Origo managing partner Derek Footer about the firm and the opportunity he sees in Chile, and Latin America more broadly:
SUB: Please briefly describe the overall vision behind Origo Ventures.
Footer: Our vision is to enable the growth of the best companies in Latin America, and provide a path for them to expand throughout the region and an eventual exit. There is essentially no one in the immediate post-accelerator stage funding these companies, and thus many of them are desperate for capital. It makes lots of sense—we have little competition for the best companies, and they get funding from an entrepreneur-friendly fund that can enable them to get on a viable path to exit.
SUB: With your recent forays into the Chilean market, what do you find attractive, from an investment perspective, about the country, and more broadly, the region?
Footer: Make no mistake, this is a nascent ecosystem. We think Chile is the best place to base such a fund, as the government is business-friendly, encouraging entrepreneurship through programs like Startup Chile and CORFO. There are a number of excellent accelerators in the country, and over 300 tech startups are founded every year, with founders from throughout the region and the world. There is strong rule-of-law, a stable financial and political environment, and it is a great country to visit and in which to live. Most importantly for us, it is a great test market for young companies, with the highest Internet and mobile penetration in Latin America. And Chileans are respected throughout the region, making it a springboard to enter larger markets like Mexico.
As for Latin America, we are really focused on investing in three countries: Chile, Mexico, and Colombia. We look at Peru and Uruguay, and will no doubt do some investments there as well. We like these countries because they have business and entrepreneurially oriented governments, we are comfortable with their legal and business regimes, they have a combined market size enabling real growth, and they are working together to build a real free-trade area through the Alianza del Pacifico that will make our job easier.
SUB: In what kinds of companies are you looking to invest in Chile?
Footer: We invest in gaming and software platforms underlying mobile, consumer Internet, health and energy. But we are opportunistic, none of those areas are big enough right now to be so rigidly focused on them alone, so we look at everything. We are mentors at Startup Chile, the Founders Institute, NXTP Labs, Wayra, IncubaUC, and others, so we are exposed to nearly all the tech companies there.
SUB: What kinds of companies/sectors would you say are leading the way in Latin America in terms of innovation right now?
Footer: I think the companies seen as most promising are in the mobile, beauty, education and ecommerce areas. We are a little more holistic; we think Latin America has particular cultural advantages that will give it the edge in certain areas—I think consumer hardware, wearables, beauty, design, specific mobile applications, and mining are areas where Latin America can compete globally.
SUB: Generally, what characteristics do you look for in a company and in founders when you are considering an investment?
Footer: We are very founder-focused. We look at founders who are flexible and not wedded to one idea, who are focused on long-term survival, who know they need to expand throughout the region to succeed, who focus on cost-control as well as ramping up sales, who prefer revenue to investment, who like to work as opposed to attending events and conferences, who are confident they can make it in the big leagues—Silicon Valley and New York—and aim for that goal, who are coachable and listen to mentors but make up their own minds based on what they know. Combine that with a good idea that has legs and plenty of room to pivot, in an area that plays to Latin America’s cultural and economic advantages, and we are willing to invest.
